Merger more important for NZME than Fairfax - fund manager

(Getty)
(Getty)

Fairfax Media and NZME will be considering their future together in the coming days and weeks after the Commerce Commission decided to block a proposed merger between the two media giants.

The unification of the two businesses would have seen 90 percent of New Zealand's newspapers under the control of the same owner.

However, the decision could still be overturned by the time the final ruling is made in early 2017 - and Devon Funds portfolio manager Nick Dravitzki says it's given the companies a chance to revise their proposition.

"They've asked for further information from both parties, and they go through a new process and come to a decision in March next year - but with this preliminary decision, they've created a pretty high hurdle for those guys to get over," he explained.

"I was surprised [at the decision] because the Commerce Commission has a record of saying yes to most things - if you look back in recent years, they've said yes to Z Energy buying Caltex [and] they've said yes to IAG buying AMI."

Mr Dravitzki says it is going to be very difficult for NZME in particular to placate the numerous issues the Commission brought up in its decision.

"What they've done is said, 'Would this reduce competition?' Absolutely yes, and then they've said, 'Can we allow it anyway if the benefits outweigh the costs?' and they've decided that doesn't appear to be the case because of media concentration issues."

NZME and Fairfax have complained the commission did not take into consideration that newspapers are not going to be part of New Zealand's media landscape for much longer - and Mr Dravitzki says that's a "legitimate argument".

He says while Fairfax Media is "a big Australian business" that could cope without the merger going through, NZME may suffer terribly if they don't join forces as news is "pretty much their whole business".

"It's a very important step [for NZME] - it's not do-or-die immediately, but what this proposed was that they could save a lot of costs because there's a lot of duplication across both businesses [and] they could obviously get better pricing from their advertising.

"It gave them the opportunity to generate a whole bunch of cash, pay off a bit of debt and to reshape their business."

The two companies will now make further submissions in an attempt to convince the Commerce Commission to change its mind.

Newshub.

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